Home Equity Loans and Lines of Credit
There are occasions when the first mortgage that you all ready have is the best loan for you and you should keep it. Reasons for not refinancing a first mortgage include the rate on the first mortgage is low and currently not available in the market place and that the current mortgage may have a pre-payment penalty. Other considerations include the overall expense of refinancing and perhaps a deterioration of credit worthiness.
If you find yourself in a similar situation, where there are compelling reasons to keep your current first mortgage, but you still have a need to obtain the many benefits of a home loan, you should consider a second mortgage or Home Equity Loan.
A second mortgage or Home Equity Loan can provide you with the funds that you need for...
- Cash for Any Reason
- Debt Consolidations
- Home Improvements
- Purchase of another House (New Residence, Vacation Home, Investment Property)
While allowing you to keep your first (existing) mortgage in place.
There are two basic types of second mortgages. Closed end second mortgages work like your existing first mortgage. You get all of the money up front and the number of payments are fixed. The payment itself can be variable but the number of payments remains fixed.
The second type is a Home Equity Line of Credit or what the industry refers to as a HELOC. These are very useful and flexible financial instruments. Unlike the closed end second mortgage, the HELOC allows you to close on the loan but not use the money until you actually need it. The money is accessed by the use of checks. The home owner writes out a check for whatever purpose and the interest paid is only on the money used.
No Closing Cost Home Equity Line of Credit
Express Home Mortgage offers a variety of HELOCS and Closed End Second Mortgages. The most popular HELOC that we offer has a 10 year draw period (the period that you can draw money out, repay it, and draw the money out again for another reason), and a 20 year repayment period. What is even better, is that we offer this program without any closing costs at all. What could be better than that?
All HELOCs have adjustable rates. They are usually tied to the prime rate in some fashion. Like first mortgages, second mortgages and HELOCs can have a pre-payment penalty. You should be equally diligent in shopping for a second mortgage or HELOC as you would for a first mortgage.
Second mortgages carry more risk to the investor. Should a borrower not be able to meet the monthly payment obligation, in order for a second mortgage holder to foreclose on the property, they may need to buy out the first mortgage. This means that the second mortgage holder has all of the risk of the first mortgage but is only getting interest on a smaller second mortgage. Consequently, second mortgages usually carry higher rates than first mortgages because of this additional risk to the investor.
Unfortunately, due to this additional risk aspect of second mortgages, people with severely damaged credit may not qualify for these programs. In these situations, one may be limited to a first mortgage refinance. Because first mortgages usually carry less risk to the investor, people with credit issues still may be able to accomplish their financing goals using a first mortgage.
Simply put, a first mortgage is the mortgage that was filed against your property deed first. Any mortgage filed after the first mortgage, is considered subordinate financing and is usually a second mortgage.